A bill that could have blocked Cadiz Inc.’s plan to pump groundwater out of the Mojave Desert died in the California Legislature for a second straight year on Friday, dealing a blow to the company's opponents after days of intense lobbying.

The measure was shelved by the Senate Appropriations Committee after a short discussion on the final day of the legislative session.

The bill would have required a new state environmental review before the company could proceed with its plan to pump groundwater and pipe it across the desert to sell to Southern California cities.

“It is a failure of the legislative leadership to follow through on its stated commitment to preserve California from the onslaughts of the Trump administration," said Chris Clarke, California desert program manager for the National Parks Conservation Association. "We had the votes in the Senate. The legislature as a whole was ready to act on this. They were prevented by leadership."

Clarke and other supporters of the legislation pointed out that Senate leader Toni Atkins had the power to bring the bill to the Senate floor but didn't.

The bill was passed by the Assembly two days earlier in a 50-23 vote.

With the legislation now out of the way, Cadiz will have an easier path toward pumping up to 16.3 billion gallons of groundwater per year on land surrounded by Mojave Trails National Monument, especially after last year's decision by the Trump administration to green-light the company's water pipeline.

Conservation groups lobbied hard for the bill, saying Cadiz’s project threatens desert springs and wildlife, and should undergo a state environmental review.

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Water flows in Bonanza Spring in the Mojave Desert,(Photo: Jay Calderon/The Desert Sun)

“It’s disappointing that lawmakers are failing to protect California’s precious groundwater. The Cadiz project is a disaster that will suck the desert dry for private profit,” said Randi Spivak, public lands director at the Center for Biological Diversity. “Cadiz is an unsustainable water-privatization scheme that will devastate desert wildlife and Mojave Desert’s ecosystem to promote urban sprawl. It’s important to remember that this fight is not over.”

Opponents of Senate Bill 120 argued that it would have unfairly singled out Cadiz for scrutiny and would have set a dangerous precedent of state lawmakers second-guessing infrastructure projects that have already been reviewed under the California Environmental Quality Act, or CEQA. The bill's opponents included dozens of labor unions, business groups and water agencies.

Amid the last-minute lobbying in the Senate on Friday, a flier was circulated at the Capitol urging senators to vote no and alleging that “short-sellers” who are betting against the company stand to make millions if the legislation passes and the stock price falls.

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The flier was titled “The Big Short” and charged: “Short-sellers have a history of coordinating with project opponents and government agencies to manipulate the company’s stock price and reap significant profits.” It urged senators: “Don’t let hedge funds manipulate state policy to make millions.”

A flier circulated at the California Capitol on the final day of the legislative session urged Senators to vote against SB120.(Photo: Submitted)

Kim Delfino, the California program director for Defenders of Wildlife, an environmental advocacy group, said she couldn’t recall ever seeing a lobbying tactic like the flier.

“I was shocked by it actually,” she said, pointing out that there was no name or affiliation on the flier at all. “When no one wants to claim credit for something, you have to ask why.”

The fight over the legislation also involved political contributions, pleas from scientists and celebrities, and accusations of financial improprieties leveled by the CEO of an investment management firm.

In urging lawmakers to vote down the bill, one ally of Cadiz raised questions about possible insider trading by people who might have known the bill was coming.

Burland East, CEO of American Assets Capital Advisers, wrote in an Aug. 26 letter to the chair and vice chair of the Assembly Natural Resources Committee that publicly available information about stock purchases shows an unusual amount of “short positions” were purchased against Cadiz Inc., which is publicly traded on the NASDAQ stock exchange.

A short position allows an investor to borrow a stock from a brokerage at one price, and then return the stock to the brokerage later, when the price has changed. The strategy is used to bet that a stock price will go down.

“There is a known history of suspected collusion between members of government, project opponents and short sellers in this company’s securities,” East said in the letter. “We ask that communications from staffs of the legislators promoting AB 1000 and SB 120 be evaluated as to whether they have tipped members of the investment community” about the legislation.

East, whose firm invests in Cadiz stock for its clients, said there are concerns about potential conflicts of interest and securities violations. He also suggested, without elaborating, that it would be “reasonable for Senator Feinstein and her husband Richard Blum as well as his affiliated entities to disclose any potential interests in Cadiz or its competitors.”

U.S. Sen. Dianne Feinstein has long been a vocal opponent of the Cadiz project and supported SB 120.

East called SB 120 “a horrible bill symptomatic of a banana republic process” and said it should be scrapped. He said he forwarded his letter to Gov. Brown and Senate leaders – as well as the U.S. Securities and Exchange Commission and NASDAQ “for the evaluation of potential unethical and illegal activity.”

The text of SB 120 was written by state Sen. Richard Roth, a Riverside Democrat, and was introduced a week before the end of the session. The bill would have prohibited projects that transfer groundwater out of the desert, unless the State Lands Commission and the Department of Fish and Wildlife conclude the proposed water transfers "will not adversely affect the natural or cultural resources" of nearby state or federal lands.

Atkins voted to support AB 1000 in the Natural Resources Committee last year, and supporters of the new bill asked why she didn't act to put the measure before the full Senate this year.

"I’m disappointed that she didn’t follow through on her stated opposition to the Cadiz project," Clarke said. "I don’t know why she didn’t follow through."

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Plants and trees grow along the water flow in Bonanza Spring in the Mojave Desert,(Photo: Jay Calderon/The Desert Sun)

Supporters of the bill also asked why other Senate leaders, including Sen. Kevin de León, hadn't made way for a vote on the measure.

Atkins didn’t respond to a request for comment on the legislation. A spokesperson for de León said the senator was unavailable to comment.

Sen. Anthony Portantino, who chairs the Appropriations Committee, indicated that he supports the aim of the bill but expressed concern about the process.

Cadiz hired several well-connected lobbyists to fight the bill. In June, the company hired a lobbying firm led by Greg Campbell, former chief of staff to Atkins. Cadiz hired three more lobbying firms this week, including one led by Justin Fanslau, Atkins' former legislative director.

Atkins received several campaign contributions from Cadiz and people linked to the company last year, including $4,400 from the company, $1,000 from a Cadiz employee, and $11,150 from more than a dozen employees of the law firm Brownstein Hyatt Farber Schreck LLP, which owns shares of Cadiz, state records show. Cadiz also gave $5,000 to de León's short-lived campaign for lieutenant governor last year — a contribution he later returned.

De León is now challenging Feinstein, who is up for re-election in November.

This week, water scientist Peter Gleick co-wrote an op-ed article with Mary Martin, former superintendent of Mojave National Preserve, urging senators to pass the bill.

“Science and economics have never supported backers’ claims that the project can be a sustainable part of California’s water portfolio, yet this project is still alive thanks to a Trump administration all too eager to help,” Gleick and Martin wrote. “Proposals like Cadiz belong to a 20th-century mentality of unsustainable, ecologically damaging water projects.”

Groups that opposed the bill include the California Chamber of Commerce, the California Building Industry Association and the State Building and Construction Trades Council, an influential labor union. In a letter to lawmakers this week, those groups and dozens of others said SB 120 posed "a potential threat to any infrastructure project in the state" —in part, they said, because it would have undermined the California Environmental Quality Act.

"This bill disregards CEQA as the final arbiter of environmental safety and sets a dangerous precedent that once any infrastructure project goes through the CEQA process, it has not necessarily complied with California environmental law," the groups wrote. "This precedent would make uncertain the finality of CEQA reviews."

Cadiz spokesperson Courtney Degener said the company's critics could have introduced a bill months ago — when it could have been debated openly and under regular order — but instead chose to rush a bill through the Legislature in the last days of the session.

The measure was introduced as a “gut and amend” bill, in which the text of a welfare bill was deleted and replaced with the language targeting Cadiz.

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The company Cadiz Inc. grows table grapes on its property in the Mojave Desert.(Photo: Jay Calderon/The Desert Sun)

Degener pointed to the many groups that joined Cadiz in opposing SB 120, many of which don't have a position on the company's project, as a sign of the bill's flaws.

"We think everyone should be concerned about the legislative games being used here to thwart a CEQA approved, Court validated, sustainable water project that is widely supported," Degener said in an email earlier this week. "The precedent that it establishes has been what has driven nearly 70 organizations in barely 3 days to voice opposition to the bill."

The debate over the bill was the latest in a long-running series of fights over the project. The Los Angeles-based company first proposed pumping groundwater from the Mojave Desert in the 1990s.

A recent study funded by the Mojave Desert Land Trust, a nonprofit conservation group that opposes the Cadiz project, found the proposed groundwater pumping would threaten the largest spring in the southeastern Mojave Desert, an oasis for birds, frogs, bighorn sheep and other wildlife. Cadiz says the project won’t harm any of the springs in the area, and it recently presented a study in which researchers concluded Bonanza Spring wouldn’t be affected by its groundwater pumping.

Cadiz’s executives also point to the fact that their project went through an environmental review in 2011 and 2012 in which the lead agency was Orange County's Santa Margarita Water District, which plans to buy water from Cadiz. San Bernardino County approved a groundwater management plan for the project in 2012.

The company owns 34,000 acres in the desert along Route 66 in the Cadiz Valley and surrounding areas. While pursuing its plan to sell water, Cadiz has been running its wells to irrigate nearly 2,000 acres of farmland, growing lemons, grapes, raisins and other crops.

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Cadiz Inc. wants to build a pipeline along this rail line to transport water to the Colorado River Aqueduct.(Photo: Jay Calderon/The Desert Sun)

The Obama administration had hindered the project by ruling that the company would need a new permit to build a water pipeline alongside a railroad. But the Trump administration reversed that decision last year. The federal Bureau of Land Management told Cadiz it won’t need a permit to build the pipeline along the railroad right-of-way.

Cadiz has said it plans to move ahead with designing and building the 43-mile pipeline from its property to the Colorado River Aqueduct.

California regulators still could complicate Cadiz's plans. The State Lands Commission, which is chaired by Newsom, told the company last year that a portion of its pipeline would pass through state-owned lands, meaning that it would require a lease and the state agency’s approval.